SpaceX, the rocket and satellite maker led by Elon Musk, said on Monday it had acquired xAI, the artificial intelligence company controlled by Mr. Musk, a sweeping move to consolidate his business empire as it faces questions about the cost of its A.I. ambitions.<\/p>\n
The exact financial details of the deal were not disclosed, but the acquisition cements SpaceX\u2019s standing as the most valuable private company<\/a> in the world, and creates a company worth more than $1 trillion.<\/p>\n The combined company, with a portfolio including rockets, an A.I. chatbot and the social media platform X, will probably move forward with an initial public offering around June, said two people familiar with the plan who spoke on the condition of anonymity because the details weren\u2019t public. Mr. Musk hopes to raise about $50 billion with the offering, they added.<\/p>\n By merging the companies, Mr. Musk provided a financial lifeline to xAI, which was founded later than A.I. rivals and has spent billions of dollars to catch up. SpaceX, also a heavy spender, will take on a slice of the A.I. boom and add fuel to Mr. Musk\u2019s recent ambition to build data centers, the computing sites for powering the technology, in space.<\/p>\n \u201cSpaceX has acquired xAI to form the most ambitious, vertically-integrated innovation engine on (and off) Earth, with A.I., rockets, space-based internet, direct-to-mobile device communications and the world\u2019s foremost real-time information and free speech platform,\u201d Mr. Musk wrote in a memo addressed to some of his employees and obtained by The New York Times. Building data centers in space was a primary driver for the transaction, he added.<\/p>\n The unusual arrangement demonstrates how Mr. Musk, the world\u2019s richest man, increasingly thinks of his various businesses as interconnected, even if there are no obvious overlaps. Last year, he merged X with xAI<\/a> to consolidate the companies\u2019 data, compute power and work forces. Now he\u2019s taking an even bigger leap, merging the often troubled A.I. start-up with SpaceX, the most successful private space company in the world.<\/p>\n Mr. Musk, in the memo sent to workers at SpaceX and xAI, described the combined operation with lofty language that evoked science fiction tales of humanity\u2019s conquering space and traveling through the galaxy. The merger also helps Mr. Musk with a more earthly ambition to give his company more financial heft.<\/p>\n But it would take a leap of faith to understand how a company that combined social media with an A.I. chatbot will help SpaceX achieve what Mr. Musk has long described as its ultimate goal: taking humans to Mars<\/a>.<\/p>\n SpaceX confirmed the acquisition<\/a> on its website and shared Mr. Musk\u2019s memo. Representatives for SpaceX and xAI did not return requests for comment. Mr. Musk did not respond to an emailed request for comment.<\/p>\n Ross Gerber, an investor in several of Mr. Musk\u2019s ventures, said in a post on social media that investors had been told the combined company was valued at $1.25 trillion.<\/p>\n SpaceX informed investors that it was valued at $1 trillion, up from a roughly $800 billion valuation in December, said one of the people familiar with the plan as well as a third person with knowledge of it, who also spoke on the condition of anonymity. The deal valued xAI at $250 billion, the people said.<\/p>\n In a separate email to xAI employees sent after the deal announcement and seen by The Times, xAI said that the A.I. company\u2019s valuation would remain unchanged since its January fund-raising round, and that most jobs would be unaffected by the merger.<\/p>\n While a public offering would probably occur this year, \u201cwhether it actually happens, when it happens and at what valuation are still highly uncertain,\u201d the unsigned email said. \u201cBut the thinking is that if we execute brilliantly and the markets cooperate, a public offering could raise a significant amount of capital.\u201d<\/p>\n In a briefing with investors on Monday afternoon, SpaceX representatives said the deal would be paid for with the issuing of $250 billion in new shares, according to one of the people familiar with the plan, who was on the call. That means SpaceX\u2019s longtime backers were forced to shrink their ownership in the company drastically, as a percentage, to pay for the acquisition.<\/p>\n Mr. Musk\u2019s bet is that the combined enterprise will eventually be worth far more than SpaceX would have been on its own, the person said.<\/p>\n Tesla, Mr. Musk\u2019s automaker, is a publicly traded company that must disclose its finances and other information to shareholders. Mr. Musk prevailed in a battle with some of Tesla\u2019s shareholders over a $1 trillion pay package last year.<\/p>\n Most of his companies, however, are privately held and more opaque. Because of that, he doesn\u2019t need to seek stakeholder approval for many of his business decisions.<\/p>\n His private companies include SpaceX; the Boring Company, a tunneling start-up; and Neuralink, a brain interface company. Mr. Musk often moves resources and employees among his companies, defying traditional business norms and operating his companies as one big Musk enterprise.<\/p>\n Mr. Musk made a similar maneuver in 2016 when he used Tesla stock to buy SolarCity<\/a>, a clean energy company where he was the largest shareholder and his cousin Lyndon Rive was chief executive.<\/p>\n \u201cUltimately, it\u2019s likely there will be one Musk Inc. at the end,\u201d said Peter Diamandis, the founder of the XPrize Foundation, a nonprofit focused on fostering technological development. Mr. Diamandis, who is an investor in SpaceX and xAI, said he always believed Mr. Musk\u2019s vision was to merge his companies.<\/p>\n The combination of SpaceX, a major government contractor, and xAI carries some reputational risk. Mr. Musk\u2019s chatbot, Grok, is the subject of several international investigations after it produced a spree of nonconsensual nude image<\/a>s last month. And world leaders have fretted about the political influence<\/a> Mr. Musk wields through Starlink, the satellite internet provider owned by SpaceX.<\/p>\n The deal could also present financial risks. The A.I. start-up has burned through cash to build data centers, while earning little from subscribers who pay for higher tiers of access to Grok.<\/p>\n SpaceX, in contrast, retains lucrative government contracts and has amassed billions of dollars in funding over the years from investors including Founders Fund and Google\u2019s parent company, Alphabet. The company also burns cash on its development of self-landing rockets and satellites.<\/p>\n Mr. Musk plans to allocate some of that spending to send data centers to space, where there are no land constraints and closer proximity to the sun for solar energy.<\/p>\n \u201cMy estimate is that within 2 to 3 years, the lowest cost way to generate A.I. compute will be in space,\u201d Mr. Musk wrote in his memo to SpaceX and xAI employees. \u201cThis cost-efficiency alone will enable innovative companies to forge ahead in training their A.I. models and processing data at unprecedented speeds and scales, accelerating breakthroughs in our understanding of physics and invention of technologies that benefit humanity.\u201d<\/p>\n